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SouthWest

Company name, website and industry

The company I would be analyzing is Southwest Airlines which operates in the Airline industry. The website of the company is https://www.southwest.com.

Background and history of southwest Airlines

Southwest Airlines was founded in 1967 and it stands as the premier low-cost air carrier in the United States. The company was incorporated by Rollin King and Herb Kelleher on March 16, 1967 (Lauer, 2010). As of 2013, the company had a fleet of 579 planes and flies between eighty-nine destinations. It has the reputation of being the highest utilized airline by American citizens for domestic flights with an operation of about 3,400 flights each day. In 2012, the company had an annual revenue of $17 billion (Hill & Jones, 2013). Its current chief executive officer is Gary C. Kelly who has received several honors, including being the best CEO in the US for 2008, 2009 and 2010 (Hill & Jones, 2013).

Analysis of Southwest Airlines using Porter’s Five Forces Model

Competitive rivalry-High. Southwest Airline’s direct competitors comprise of six major low-carriers operating in the domestic market with similar services such as Delta Air Lines, American Airlines, United Continental Holdings, JetBlue Airways, US Airways Groups and Allegiant Travel. This offers a strong competition., considering their operation in the domestic market and provision of similar competitive packages such as low-cost flights (Flouris & Oswald, 2016).

Threat of new entrants-Moderate. New low cost Airline firms could enter the industry and attract customers. As much as entry into the market is minimized by the huge capital investments required for venturing into the industry, there are no barriers to entry (Flouris & Oswald, 2016).

Bargaining power of suppliers-High. Planes suppliers in the industry include Airbus and Boeing. Supply of fuel in the Airline industry is extremely volatile and unpredictable. This makes the bargaining power of suppliers high.

Bargaining power of buyers-High. Most of the competitors or low cost carriers in the industry offers similar services and limited differentiation. Buyers have a high bargaining power due to availability of alternatives with similar benefits. In order to address the high buyers’ bargaining power, the company can decide on less cancelations, lower price, fewer delays and more amenities (Flouris & Oswald, 2016).

Threat of substitutes-Low. Alternative means of transport such as vehicles, ship and train do not significantly compete with air transport owing to their high speed, comfort and time savings.

Strategy used

Michael Porter presented generic strategies that can be employed by a company to overcome the five forces and accomplish competitive advantage. The first strategy presented is the overall cost leadership which is based on creating a low-cost position (Dess, McNamara, & Eisner, 2015). The strategy involves management of relationships through lower costs and value chain throughout the entire chain. The second strategy presented by Porter is differentiation, which requires companies to create products and services that are valued and unique (Dess, McNamara, & Eisner, 2015). The primary emphasis here is on nonprice attributes of the strategy for which the customers will willingly pay a premium. The third strategy is a focus strategy which directs attention toward buyer segments, narrow product lines or targeted geographic markets which must be attained either through cost leadership or differentiation (Dess, McNamara, & Eisner, 2015).

Southwest's management employed overall cost leadership and differentiation by implementing and executing the company's strategy for keeping the company's fares charges at low cost and differentiating themselves through the provision of drinks to travelers. They ensured that Southwest had a competitive advantage over rivals such as the American Airlines, Delta Airlines, Continental Airlines, JetBlue Airways and Northwest Airlines to become the most successful and profitable airline in the United States. The company's capability of making profits every year despite the economic recessions that made rivals and the Airline industry in general to make financial losses through a winning strategy was the most crucial strategy in accounting for the success of Southwest (Dess, McNamara, & Eisner, 2015). I like the strategies because enabled the company to survive in the market since it was facing so many challenges where rival Airlines were trying as much as they can to block it from penetrating and gaining a market share. Through this strategy, Southwest managed to keep its operating costs lowest across the industry hence gaining the low-cost advantage over industry rivals.

The low-cost/no-frills strategy of Southwest involves the company's ability to make air travel affordable by maintaining low cost. The lowest fares were usually nonrefundable with an option of applying for future travel on the Airline without incurring additional charges. It also offered the "Bags Fly Free" policy allowing customers to fly their bags without incurring additional costs (Hill & Jones, 2013). The high volume of customer traffic on the airline and filling up all seats on aircraft enable the company to compensate for low fares charges. The company operates only one type of aircraft the Boeing 737 which minimizes costs and size of spare parts and simplifies training of repair and maintenance personnel (Hill & Jones, 2013). The company was also the pioneer of ticketless travel through the purchase of tickets through the company's website hence reducing the cost of stationery and papers. They offered travelers with low-fares and still maintained quality in service delivery. They used less congested airports as opposed to major airports hence reducing fuel consumption as a result of delays on congested runways (Hill & Jones, 2013).

Specific strategies

Ensuring Coherence in Strategic Direction. This strategy involves managers and employees of an organization strive toward attaining common goals and objectives by specifying the desired goals (Dess, McNamara, & Eisner, 2015). Coherence in strategic direction also involves expression of priorities through stated objectives and goals, including mission, vision and strategic objectives (Dess, McNamara, & Eisner, 2015). Southwest Airlines employed this strategy through their dedication on achieving the highest quality of customer service delivery. The company’s mission is dedication to the highest quality of customer service delivery with a sense of friendliness, warmth, company spirit and individual pride. To ensure achievement of this strategy through attainment of common goals and objectives, Southwest developed an organization culture that would promote the success. Southwest culture involves the value of employees' welfare first then customers comes next (Hill & Jones, 2013). The company believes that satisfied and happy employees would provide quality services to customers hence achieving high levels of customer satisfaction. I think this is a strong organizational culture where employees have a positive attitude towards their responsibilities and the organization that promotes productivity and profitability.

Resource-based view of the firm. The resource-based view of the firm provides a combination of two perspectives of the firm, that is, an internal analysis of the company and an external analysis of the industry the firm operates in as well as its competitive advantage (Dess, McNamara, & Eisner, 2015). Southwest Airlines has employed this strategy effectively, evident through its strengths and opportunities versus the weaknesses and threats. Some of the company’s strengths include market leadership and high growth rates, being a pioneer in offering ticketless reservations of flights and services for freight delivery through air transport, competent, motivated, determined and hardworking employees leading to increased productivity and high ticket sales and competitive advantage through low-fare strategy hence drawing customers to seek their flight services leading to increased profits (Hill & Jones, 2013). Others include strong organizational culture based on a positive attitude towards work and responsibility and commitment to service delivery, low-cost leadership that is a competitive advantage, the company has an iconic and influential brand and a strong and large market share in the US domestic market. These strengths are unique and difficult to imitate thus making the company maintain a competitive edge.

With regard to possession of resources, the company has created a portfolio of resource acquisitions. For instance, it expanded its market share through acquisition of AirTran. The acquisition of AirTran makes a good strategic sense for Southwest since AirTran has made revenues of $2.5 billion and an operating income of $128 million for the past twelve months ending June 30, 2010, which means that it is a profitable undertaking. They have the same strategies since they are both low-cost, low-fare airlines, and, therefore, they would be able to complement each other. AirTran served 70 airports in the US, the Caribbean and Mexico and 19 of these coincided with airports served by Southwest hence making it easier for integration. It would also give Southwest an opportunity to expand its operations to Atlanta market that could translate to 2 million additional passengers for Southwest Airline annually.

Course of action recommended

Strategic issues that Gary Kelly and Southwest executives need to address include modification of their initial strategic plan that was crafted for its operations in the domestic market since acquisition of AirTran will necessitate international operations. The company is therefore obliged through its management headed by Gary Kelly to go through international standards and regulations and learn the new practices regarding international flights. He can integrate AirTran's employees into Southwest effectively by training the employees, inducting the employees to understand the culture of Southwest, training them through Southwest University to meet the safety and training requirement, courses in performance appraisal, stress management, and decision making.

I would recommend Gary Kelly and Southwest executives to implement the following as the company heads to the next year to facilitate smooth transition from a domestic Airline to an Airline that provides flight services in international markets. These recommendations will help in ensuring that the company maintains its public image, market share and even grow further through expansion and exploitation of other markets.

1. Focus on addressing the customer complaints by ensuring that the level of complaints reduces through increased customer satisfaction.

2. Maintain the "Bags Fly Free" policy since it is a significant source of the company's competitive advantage.

3. Emphasize on Gary Kelly's key success factors of hiring great people, caring for customers, staying prepared for the worst outcomes and keeping operating costs and fares lower.

4. Devise a plan for integration of AirTran into Southwest Airlines effectively by paying attention to the high risks of attaining AirTran and venturing into new markets.

Opinion

I think the case study provides an insightful information on the significance of strategies on overall competitiveness of an organization. from the case study, I have learnt about the importance of strategies and organizational culture in gaining a competitive edge. Southwest employed a number of strategies, including cost leadership through low cost flights and differentiation through provision of unique customer service which made them gain competitive advantage over other industry players.

Dess, G. G., McNamara, G., & Eisner, A. B. (2015). Strategic management : text and cases. Dubuque: McGraw-Hill Education.

Flouris, T. G., & Oswald, S. L. (2016). Designing and Executing Strategy in Aviation Management. Routledge.

Hill, C. W., & Jones, G. R. (2013). Strategic Management Cases: An Integrated Approach. Cengage Learning.

Lauer, C. (2010). Southwest Airlines. Santa Barbara, Calif.: Greenwood.